Three High-Yield Tech Stocks for Income Investors

Technology stocks are not usually associated with generous dividends.

The prospect of rising interest rates can hurt the average income investor, but there are still ways to find high yield in equities. Dividend-paying tech stocks are actually well suited to the current economic environment, as they often have a lot of cash on hand, and can weather changes in inflation. Some technology companies now offer a yield of over 4%. But the first thing investors should ask is if this is too good to be true.

Intel Corporation (NASDAQ:INTC) shares have dropped steadily since June 2013. Shares now pay a dividend yielding 4.09%. Investors soured on the possibility that the demand for PCs will recover. Demand for computers (including laptops) steadily fell throughout 2013, extending declines from last year. IDC thinks shipments will drop 9.7% in 2013. Hewlett-Packard Company (NYSE:HPQ) and Dell (NASDAQ:DELL) both reported weak PC sales recently, which suggests that Intel will face challenges in the near term.

Despite these worries, Intel is still refreshing its product line-up of processors. Its Haswell processor will be updated as early as September. There could be as many as 13 processors introduced, and 24 Haswell chips announced that are made for the laptop market. This will push Intel ahead in offering low-energy-consuming processors, especially after Advanced Micro Devices (NYSE:AMD) delayed the launch of its latest budget processor.

Iron Mountain (NYSE:IRM) yields a dividend of 4.19%. The business software and services company offers records management services for companies, such as paper shredding. Shares plunged back in June after the IRS questioned the eligibility of Iron Mountain converting to an REIT. In the second quarter, the company earned $0.29 per share on revenues of $755 million. The company said during its conference call that the IRS is studying its REIT plan, which will lengthen the duration it will take to convert.

STMicroelectronics NV (NYSE:STM) yields 4.27%, after shares dropped from $9.94 in July 2013 to close at $7.97. The company expects revenue this quarter to be flat. Analysts had expected the company to grow revenue by 3.7%. The company pointed to a softening in the smartphone market for the soft outlook. In the second half of the year, the company will ramp up products in automotive, microcontrollers and imaging sectors. This will help increase revenue in the third and fourth quarters.

A high dividend yield helps cushion investors from losses when the stock price drops, but this does not mean that fundamentals should be ignored. All three companies had a recent event that triggered a sell-off in its shares, but fundamentals did not deteriorate significantly. Iron Mountain could still convert to an REIT, but this will take longer. Intel could face light sales, but the company continues to innovate. STMicroelectronics expects a light quarter, but growth could rebound.

Editor's note: This article was written by Chris Lau, a Kapitall writer.

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